Sentiments, trading conditions and prices have been under pressure in the local Indian rebar market amid adverse reports on major construction and infrastructure projects and the worsening of steel mills’ profits, prompting an across-the-board lowering of prices.
According to sources, the Indian government announcement debarring Chinese companies’ participation through Indian joint ventures in highway construction and infrastructure projects has created a negative mood in the market, with participants anticipating that this will further push back any possibility of a demand revival from government-funded large construction projects.
A steel sector analyst at a Mumbai-based financial services firm said that rebar producers, particularly among secondary steel mills, have been caught in a bind between the sharp fall in profits and the pressure to steadily lower prices, and this has been putting severe stress on their operations.
The analyst said that rebar conversion spreads (sales realizations minus costs of raw materials and intermediates) declined by 23 percent in June and are expected to fall further as most producers are having to steadily cut prices to keep pushing volumes in a market deep in a demand recession.
Market sources said that large integrated steel mills are relatively better positioned to keep cash flows positive by exporting billets, instead of increasing production of rebars. Despite this, most integrated steel mills have reduced rebar prices in the local market by INR 300/mt ($4/mt) during the past week to INR 35,200/mt ($471/mt) ex-stockyard.
Secondary steel mills have cut rebar prices by INR 400/mt ($5/mt) to INR 28,900/mt ($386/mt) ex-stockyard, the sources said.
“Construction activities, particularly in the case of government-funded projects have not picked up as expected. Bookings are very low and there is too much supply in the market, particularly from fragmented secondary producers,” an official at exclusive long product manufacturer Rashtriya Ispat Nigam Limited (RINL) said.
“Rebar prices will remain under longer-than-expected pressure and it will take at least three more quarters to revive,” he added.